The Shock Doctrine 4: States of Shock

“If that track record qualifies Chile as a miracle for Chicago school economists, perhaps shock treatment was never really about jolting the economy into health. Perhaps it was meant to do exactly what it did—hoover wealth up to the top and shock much of the middle class out of existence.” - The Shock Doctrine, page 105

(Previous posts here, Matt's posts here, here and here.)

Trend gave us an excellent rundown of the events in Chile that led to the Chicago School takeover of its economic policy, so I don't need to sum that up here.

Pinochet embraced the Chicago Boys' prescription for Chile's economy, according to Klein, because he liked the idea of a complete revolution rather than a temporary correction. He drove out the other members of the junta and appointed several of the Friedmanites to high government positions, and privatized, slashed social spending, and deregulated. This, predictably led to...

inflation, unemployment, and poverty. So the solution? MORE privatization, deregulation, and slashing social spending. Oh yes, and a calculated terror campaign in which thousands of people were "disappeared." Argentina, Uruguay, and Brazil followed soon after, though some of them took notes from Pinochet and attempted to conceal their torture and murder under a blanket of plausible deniability--in order to stay open to foreign investment, of course.

Klein points out that for all Friedman's free-market utopianism, what resulted was more corporatism than purist capitalism. The countries were run by repressive regimes with deep ties to the corporations who profited from them. Sound familiar? (Well, minus some of the repression.)

The parallels with Bush's disaster capitalism are easier to see when you phrase it in these terms. Bush didn't need a coup (just a disputed election) when September 11 happened (coincidentally, exactly 28 years after the coup in Chile started radical capitalist experimentation).

Warrantless wiretapping certainly isn't mass disappearances of citizens, but it is a tool that keeps everyone in fear that they are next. It suppresses dissent and keeps people in fear for their basic safety, while around them their economic safety net is dismantled. America hadn't undergone enough of a shock to allow, for instance, Social Security privatization, but in Chile and the other Friedmanite regimes, torture and repression left people unable to fight back.

Roger Cohen in the New York Times (h/t Matt) referred to Obama's "counter-revolution," an interesting choice of words considering that The Economist called the spread of disaster capitalism in Latin America its own "counterrevolution."

Which revolution is Obama countering, then? The Reagan revolution, perhaps, since even Bill Clinton furthered Reaganite principles of deregulation and privatization and slashing social programs (:cough: Welfare reform)?

Friday night, I attended a panel discussion put on by The Nation in New York. It featured Joseph Stiglitz, Barbara Ehrenreich, Bill Fletcher, Jr., Jeff Madrick and Chris Hayes discussing the economic meltdown. Stiglitz referred repeatedly to the economic situation in the 70s in Latin America as what we need to avoid--and what we are in danger of repeating.

Madrick noted as well that "This is not recession as usual. This is not recession-plus as usual," but Ehrenreich reminded us that "It's always folly to say this is the end of capitalism."

She went on to note that "What we have to shake off is the curious religion that is market fundamentalism," and Fletcher referred to "the great crap game that is called capitalism."

The fact that there was a line around the block for this event says something about the times, and the amount of little white note cards with audience questions that Hayes had to sort through was evidence that people are scared right now. I fear what this situation would look like at the moment with McCain in office, and the panelists all agreed that it is hard to criticize Obama because he's so much better than what we've had for the past however many years (Madrick pointed out that the standard of living for most Americans has been declining since 1974--in other words, we were better off under NIXON).

Still, the more I read through The Shock Doctrine, the more I realize the parallels. Naomi Klein was supposed to be at this event, and she would've fit in quite well between the economists and the socialists, diagnosing not only the technical problems with our current situation, but the moral and ideological problems there as well.

But the panel on Friday night gave me hope because it proposed solutions. Because we talked about a return to a living wage, a resurgence in unions (EFCA battle coming to a political theater near you), real health care (ditto), and a change in our banking system--a return to "plain vanilla" lending, Madrick called it.

"What are the social functions which a good financial system should serve?" Stiglitz asked, and Milton Friedman might have rolled over in his grave. Still, these are questions being asked right now, and the people in power for the first time in my lifetime may actually be willing to attempt an answer.